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Tax Uniformity as a Requirement of Justice

Published online by Cambridge University Press:  18 February 2020

Charles Delmotte
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Abstract

Barbara Fried takes the view that uniform taxation—that is, a single rate applicable to all income levels—cannot be defended on any grounds of justice. She goes further by saying that, of all possible rate structures, it might be “the hardest one”? to ground in “a”? theory of fairness. Using the contractarian-constitutional perspective advanced by John Rawls and James Buchanan, this article argues that tax uniformity can be seen as a requirement of justice. After modelling how the political world realistically decides to distribute tax shares (self-interested parties act under a majority constraint), I show how the uniformity principle could emerge from the constitutional contract. In other words, rational individuals would choose uniformity as a procedural constraint under a “veil of uncertainty”?; that is, with limited knowledge regarding their positions under the future application of the rule. Moreover, I elucidate how the uniformity requirement integrates generalized criteria of fairness and efficiency into fiscal politics as it precludes fiscal exploitation and constrains majorities, and their most influential subgroups, to opt for policies in the direction of the Pareto frontier, and as such promotes outcomes acceptable to all participants.

Type
Research Article
Information
Canadian Journal of Law & Jurisprudence , Volume 33 , Issue 1 , February 2020 , pp. 59 - 83
Copyright
© The Author(s) 2020

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Footnotes

I am grateful for the helpful comments on earlier versions of the paper, notably from Malte Dold, Jerry Gaus, David Schmidtz and Jan Verplaetse.

References

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33. Buchanan & Congleton, Politics by Principle.

34. Buchanan & Tullock, Calculus of Consent, supra note 31 at 132-49.

35. Buchanan also isolates the funding part of the exchange from the expenditure. For instance, Buchanan & Tullock, ibid at 137, focus on spending decisions by a majority under the presumption of an equal property tax on all citizens. See also Buchanan and Brennan, The Reason of Rules, supra note 18. Nonetheless, I acknowledge the two-sidedness of the fiscal account; i.e., that taxation is part of public economics sensu latu, and that the justice of taxation depends on the consequent distribution of public goods among the constituency. See, for instance, Buchanan, Logical Foundations, supra note 20 at 133-49.

36. Buchanan & Congleton, Politics by Principle, supra note 16 at 30.

37. For reasons of simplicity, I also assume they realize the same subjective value from this consumption of public goods.

38. I do not wish to “prove” that collective action needs to be a collective loss under these institutional arrangements. All that the coalition “social justice” shows is that it is possible that such is the case, as the majority can make profits while the overall utility is negative. For more discussion, see points 2 and 3 hereafter, within this section.

39. Buchanan & Tullock, Calculus of Consent, supra note 31.

40. Ibid at 141-42, 168; Gwartney, supra note 29 at 18.

41. Buchanan & Tullock, Calculus of Consent, supra note 31 at 166; Gaus, Gerald, The Order of Public Reason: A Theory of Freedom and Morality in a Diverse and Bounded World (Cambridge University Press, 2011)Google Scholar at 544 [Gaus, The Order of Public Reason].

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52. Butler, supra note 28 at 62.

53. Ostrom & Ostrom, supra note 48 at 181, 193.

54. Butler, supra note 28 at 58-59.

55. Brennan & Buchanan, The Reason of Rules, supra note 18 at 3.

56. Buchanan & Tullock, Calculus of Consent, supra note 31 at 85-96.

57. Christians, “Trust in the Tax System”, supra note 3.

58. Buchanan & Tullock, Calculus of Consent, supra note 31 at 285-86.

59. Peeters, Gribnau & Badisco, “Preface”, supra note 3.

60. Ostrom & Ostrom, supra note 48 at 192.

61. Brennan, “Politics-as-Exchange”, supra note 16 at 353.

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66. Buchanan & Congleton, Politics by Principle, supra note 16 at 6-7; Brennan & Buchanan, The Reason of Rules, supra note 18 at 34.

67. In other words, in order to reveal the true principles of justice, Rawls employs “ignorance”—a condition under which imaginary choosers have no knowledge of their own identity. Buchanan’s “veil of uncertainty” (together with Brennan and later Congleton) creates a lower yet more realistic level of uncertainty: uncertainty is introduced through the generality and the quasi-permanence of constitutional rules. This test is more feasible, in the sense that in various aspects of life, people are required to choose rules under conditions of uncertainty about their specific effect on their position (e.g., when prospective partners vote on the operational rules of a company or when we decide upon the rules of a party game). Remarkably, Rawls did not always assume a veil of ignorance. In Rawls, “Justice as Fairness,” in Samual Freeman, ed, Collected Papers (Harvard University Press, 1999) at 47-72, he characterizes the original position as a setting in which players have full information of their circumstances. See also Gaus & Thrasher, supra note 64; Buchanan, Logical Foundations, supra note 20 at 146 n 7.

68. Ibid at 146.

69. Geoffrey Brennan & Alan Hamlin, “Constitutional Political Economy: The Political Philosophy of Homo Economicus?” (1997) 3:3 J Political Philosophy 280 at 290-91.

70. Rawls, Collected Papers, supra note 18 at 54. Rawls, when employing a model affiliated with the one here, equally stretched the importance of the requirement of generality: “… each person will propose principles of a general kind which will, to a large degree, gain their sense from the various applications to be made of them, the particular circumstances of which being as yet unknown.” Ibid. For an extensive elaboration, see Gaus & Thrasher, supra note 64 at 45. Here I investigate the specific value of these kinds of requirements.

71. Rawls, Collected Papers, supra note 18 at 54. See “Justice as Fairness,” supra note 67 (“Having a morality must at least imply the acknowledgment of principles as impartially applying to one’s own conduct as well as to another’s.”).

72. Rawls, A Theory of Justice, supra note 16 at 117.

73. Buchanan & Congleton, Politics by Principle, supra note 16 at 6.

74. Åsbørn Melkevik, “No Progressive Taxation Without Discrimination?” (2016) 27: 4 Constitutional Political Economy 418.

75. Hayek, The Road to Serfdom, supra note 19 at 114.

76. Bhandari, supra note 3 at 1-9.

77. Indeed, the search for generality pertains not just to the applicable rate structure but depends equally on the definition of “income.” If political agents have the legislative liberty to define when taxable income occurs, the problems we aim to solve would reoccur within the confines of our solution. Moreover, excluding some income from the tax base equals a tax exemption of 0%. For a defense of a consistent and broadly defined tax base, see Delmotte, Charles, “The Right to Autonomy as a Moral Foundation for the Realization Principle in Income Taxation” in Bhandari, Monica, ed, The Philosophical Foundations of Tax Law (Oxford University Press, 2017) 281CrossRefGoogle Scholar.

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80. Buchanan, Logical Foundations, supra note 20 at 142.

81. Gwartney, supra note 29 at 18; Buchanan & Congleton, Politics by Principle, supra note 18.

82. Richard A Epstein, “Can Anyone Beat the Flat Tax?” (2002) 19 Social Philosophy and Policy 140. Efficiency is conceptualized here as the Pareto norm: no one can be made better off without someone else being made worse off. Gaus, On Philosophy, supra note 44. Uniformity compensates for the departure from the unanimity requirement within a majoritarian democracy. Buchanan, Logical Foundations, supra note 20 at 145-46.

83. Barbara H Fried, “The Puzzling Case for Proportional Taxation” (1999) 2 Chapman L Rev 157 at 160 [Fried, “The Puzzling Case”].

84. Buchanan & Congleton, Politics by Principle, supra note 16 at 93.

85. A seminal insight of this kind convinced Mill to state that everybody should bear the same utility loss and to elaborate his “equal sacrifice” principle. See John Stuart Mill, Principles of Political Economy: with some of their applications to social philosophy, 7th ed (Longmans, 1909) at 804.

86. Epstein, “Can Anyone Beat the Flat Tax?” supra note 82 at 160; ERA Seligman, “Progressive Taxation in Theory and Practice” (1908) 9 American Economic Association Quarterly 1 at 216; H Peyton Young, “Progressive Taxation and Equal Sacrifice” (1990) 80:1 American Economic Rev 253.

87. In other words, the estimation is that the interpersonal variance in utility curves does not suggest that individuals, choosing the constitutional principles of taxation, would deny this insight.

88. Majorities could do this when they are able to discriminate in terms of spending, which they are not in my example. See Brennan, Geoffrey & Buchanan, James M, The Power to Tax: Analytical Foundations of a Fiscal Constitution (Liberty Fund, 2000)Google Scholar.

89. Young, supra note 86.

90. Peter Diamond & Emmanuel Saez, “The Case for a Progressive Tax: From Basic Research to Policy Recommendations” (2011) 25:4 J Economic Perspectives 165; Hettich & Winer, supra note 6.

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